The real global economic danger of the Coronavirus is that it has a unique feature in reducing the future economic activity of infected economies. There's an elevated concern in the institutional quality and future growth potential of developing countries. The rich global links between countries brought by investments, goods, servcices, and market assets, will reduce human-exposed activity beyond the stable products needed to survive on a day-to-day basis. As more countries are exposed to the virus, anxiety and fear will exponentially rise as global economics struggle to come to terms with next steps.
The problem with economic fear is that it inadvertently curbs crisis management and shock from developing countries that are not equipped financially. Developing countries' institutional structures force a dilemma between the health of the public and its economic development. When you're dealing with fragmented totalitarian countries, bureaucracy is weak and the dispersion of economic power takes precedent over their marginalized healthcare system.
It is a form of economic survival of the fittest whereby all actors want equal status to prevent an economic downturn that should parallel a global response to the outbreak. Indeed, widespread behavioral changes with regards to absence of work and productive activity are conducive to the mechanism of spreading the virus. For example, any school closures will have results in the disruption of working parents. The real economic impact with the coronavirus is the impact of behavioral change that will affect livestock, manufacturing, and transportation.
The media's coverage has significant economic repercussions in behavioral change and may further impact governments and global efforts to control the spread of the virus. As more developing countries get the disease, the quantitative knowledge of the population becomes limited into preventative knowledge of spreading the virus. Epidemics have a habit of dividing the population into subclasses with different contraction rates. For example, Chinatowns are severely impacted economically in North America until a different class establishes linkages of the virus. A clear example being Iran, Italy, and South Korea.
The more countries the media documents the more the public reaction becomes competitive in nature to not conduct business with a particular ethnic community. The media has the power to sway public perception. Many times, this produces a marketing effect that strengthens the competitive edge of a dominating economy against its weaker counterparts. China and Russia are great partners, however Russia has targeted Chinese communities and forcefully taken them into medical custody. Countries that are severely punished with sanctions will have a difficult time in giving accurate data of the proportion of their population infected with the coronavirus.
In developing countries, the truth is that the rural areas are the weakest link in terms of containing the spread of the virus. These rural areas simply don't have the medical resources, technical knowledge, and wealth in determining the virus. Even though China indicated that the virus would be short-lived, their media infrastructure indicated that China's A-share market might be a start of a bull run because of US stocks reaching their top whereby the A-share market is bottoming out. The Chinese media wants their A-share market to increase by over 20% this year alone because they feel they have lost so much value compared to American corporate shares.
When China indicated that their central banks would inject liquidity and support for local governments to kickstart local businesses, that enabled the Fed and the Bank of Japan to increase liquidity in their own markets. The central banks are working in unison to alleviate the financial stress of the coronavirus. Indeed, it is the survival of the fittest between the coronavirus and the central bankers that continue to purchase riskier assets and loans.
As long as you have liquidity, markets will continue to rise. However, as long as you have fear in catching the virus, the sustainability of the global economy will deteriorate the only thing that's holding up all the markets in the first place, which is confidence.
The message was clear from the World Health Organization’s director general, Dr. Tedros Adhanom Ghebreyesus on Sunday to global financial markets. Equity markets world-wide have lost $7 trillion since Feb. 19, as investors and analysts have grown increasingly alarmed over potential economic damage from the fast-growing coronavirus...I really hate to swear. However, he is a doctor. Who is paying this doctor to calm the markets rather then the individuals that are dying?! Dr. Tedros Adhanom Ghebreyesus has to resign. He made a tactical error. Who told him to calm the markets with irrational exhuberence?! He is not a doctor nor does he care about the people that are dying of the Coronavirus. If he had any sense, he will label it a pandemic crisis whereby economic resources will be deployed to combat it. This man sickens me and he should resign immediately.
Dr. Tedros is a doctor and I will caution him to do his job. The United States and the United Nations are funding the World Health Organzation (WHO), Give the global economy and the world some measure of assurance that the virus will be contained. The crisis management of a health organization is not to make predictions of the stock market just as Trump does. The WHO is rapidly losing the patience of the global markets.